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Liability for Contaminated Sites

Apr. 16, 2014

All public sector entities, local governments included, will
be required to report liability for remediation of contaminated sites for
calendar years beginning on or after April 1, 2014. The requirement is for
contaminated sites that the public sector entity has responsibility for and that
have contamination that exceeds environmental standards.

Five criteria must be met for remediation of contaminated sites
to be recognized in local government accounting:

An environmental standard exists

Contamination exceeds the environmental standard

The government is directly responsible or
accepts responsibility

It is expected that future economic benefits
will be given up, and

A reasonable estimate of the amount can be made.

For the issue of local government liability, most
liabilities for remediation arise from legal obligations that can be enforced
by a court of law. Typical examples to consider would include a liability of all
or part of an operation that is no longer in productive use, or an unexpected
event (i.e. chemical spill or natural disaster) resulting in contamination. The
regulation does not include liabilities for closure and post-closure care of a
solid waste landfill site when the site stops accepting waste.